May 21, 2010

To get out of bankruptcy, ignore how you got in

Charges that Sam Zell knew his highly leveraged deal to takeover of Tribune Co. would force the company into bankruptcy, known as a "fraudulent conveyance," could be wiped clean by another deal to get the company out of bankruptcy.

From Bloomberg:

Tribune Co. will ask creditors to vote to settle allegations Chairman Sam Zell and company lenders violated bankruptcy law and left it insolvent when they organized a 2007 buyout that took the publisher private.

As part of its effort to exit bankruptcy, Tribune will send its reorganization proposal to creditors for a vote. The reorganization is built on a proposal to settle claims by lower- ranking creditors that the buyout was a fraudulent transfer because it increased Tribune’s debt by about $8.3 billion and only benefitted Zell and company shareholders.

“We feel pretty good about what will happen at the ballot box,” Tribune attorney James Conlan said in court today.